Antitrust Laws and Keeping up with the Modern Economy

August 26, 2016, 5PM EST

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534115341153411Antitrust Laws and Keeping up with the Modern EconomyDesigned to promote competition, antitrust laws in today's economy may have a harder time keeping up due to how quickly innovation occurs.2016-08-26 12:15 pmdisabled2365830820true

Another potential antitrust issue. A startup shipping company in Hoboken is being gobbled up by Walmart, the retail giant offering Jet.com more than $3 billion so they can shut the potential competitor down. The deal’s expected to sail through a blind spot in antitrust law, which is struggling to make 19th century law work in a 21st century economy. NJTV News Anchor Mary Alice Williams asked the antitrust expert — Rutgers Law Professor Michael Carrier — what antitrust laws were designed to do.

Williams: What are antitrust laws designed to do in the first place?

Carrier: Antitrust laws are designed to promote competition. They’re designed to lower prices for the consumer, increase quality and increase innovation.

Williams: So in the 1990s Microsoft was the first and biggest IT company sued under antitrust laws. What was the significance of that case?

Carrier: That was a very important case because for the first time in the modern era it put antitrust on the front page of the newspapers. The question was can antitrust apply in the new economy? Can it be applied to fast moving questions, like whether or not Microsoft is able to bundle together its browser, Internet Explorer, with its operating system?

Williams: That effectively shut down any competitor because they own the whole thing, right? It was really the lion’s share.

Carrier: That’s a case that was at the time very important. Since then we’ve seen that Internet Explorer is not as powerful as some of the other competitors, but at the time the thought was Microsoft is owning all the little pieces. Can it really bundle them all together?

Williams: What are the challenges in enforcing antitrust laws in today’s economy?

Carrier: The challenges are that with the new economy, with a tech-based economy, it moves so quickly that perhaps antitrust isn’t equipped to keep up. By the time you have a years-long antitrust trial figuring out if certain behaviors are anti-competitive, we’ve already moved on to the new technology. So that’s a challenge that antitrust faces.

Williams: Are regulators up to the task?

Carrier: I think regulators are up to the task. There is someone that will always say that antitrust is too slow for the fast economy, but I think that regulators know what’s going on and are trying to adjust their analysis to keep up with the fast moving economy.

Williams: This is a sort of arcane question, but how does the definition of innovation play into antitrust enforcement?

Carrier: It’s a good question because antitrust has traditionally focused on price, what happens when companies get together and increase price? What’s the effect of a merger on price? Innovation is a lot harder to figure out. In fact, I wrote a book on it several years ago just because it was so hard to figure out. It’s tough to know exactly what we’re missing when, for example, two companies merge. It’s tough to figure out the innovation as compared to price, but innovation is more important for our economy than anything else, including lowering price. That’s why innovation is a crucial part of the analysis.

Williams: The Jet.com sale that I referred to, a tiny firm gobbled up by a giant retailer, not the kind of case we think of as antitrust worthy. What are the antitrust components of the deal?

Carrier: The antitrust components will be whether or not this merger violates the antitrust law. So what happens when you have a merger is you have the antitrust agencies in D.C., you have the Department of Justice and the Federal Trade Commission and one of them will be in charge of reviewing this deal to make sure it does not lessen competition.

Williams: Professor, we’re going to see more and more of these?

Carrier: We certainly are. As we have a new economy with small upstarts oftentimes leading the charge in terms of innovation, we have large brick and mortar companies that are perhaps a bit slower to pivot and so sometimes it’s quicker to buy up the new guy on the block then to innovate yourself.

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